The External Environment Jeremy Kees, Ph.D.

Basic Concepts Environmental ScanningEnvironmental Scanning is the process of collecting information about the external marketing environment to identify and interpret potential trends Environmental ManagementEnvironmental Management involves marketers’ efforts toward achieving organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social-cultural environments.

Elements of the Marketing Mix within an Environmental Framework

The Competitive Environment Competitive EnvironmentCompetitive Environment: The interactive process that occurs in the marketplace among marketers of directly competitive products, marketers of products that can be substituted for one another, and marketers competing for the consumer’s purchasing power. –As a result of the deregulation movement there has been a shift from Monopolies to Oligopolies –Do true monopolies still exist today?

Pharma Companies have Temporary Monopolies

Types of Competition Direct Competition –Competitors with similar products –Who are the major pick-up truck players? How about this company? How about this company? Indirect Competition –Products that are easily substituted –Who does Mountain Dew compete with?Who does Mountain Dew compete with? Can competition be defined even more broadly??

Marketing Strategy In developing a competitive strategy, we must ask ourselves…. –Should we compete? –If so, in what markets should we compete? –How should we compete?

Political-Legal Environment Component of the marketing environment consisting of laws and interpretations of laws that require firms to protect: – Competition and –Consumer Rights

Laws Affecting Marketing

Protecting Competition Maintaining a Competitive Environment –Aimed at to maintaining a competitive environment by reducing the trend toward monopolies –Key Laws: Sherman Antitrust Act Clayton Act

Regulating Competition –Meant to protect independent merchants against competition from larger chain stores –Key Laws (to protect Competitors) Robinson-Patman Act

Deregulation –Focused on deregulating specific industries –Key Laws (to further encourage competition) Airline Deregulation Act Telecommunications Act

Protecting Consumers –Increased focus on consumer protection –Key Laws (to protect Consumers) Federal Food & Drug Act Proposed legislation to require nutrition information….

Class Activity Think about the following food items and estimate: 1.Number of Calories 2.Number of Total Fat Grams Note: FDA recommends a diet consisting of 2,000 calories and 65 fat grams per day

“Breakfast” “Lunch” “Dinner” “Late-Night Snack”

Federal Regulatory Agencies Federal Trade Commission The FCC (telecommunications, radio, and television) The Food and Drug Administration Consumer Products Safety Commission Federal Power Commission Environmental Protection Agency Securities & Exchange Commission

Other Regulatory Forces –Consumer interest groups National Coalition Against Misuse of Pesticides PETA One Million Moms –Carl’s Jr. ExampleCarl’s Jr. Example –Special-interest groups American Association of Retired People (AARP) –Self-regulatory groups Direct Marketing Association Better Business Bureau

Controlling the Political-Legal Environment –Do the right thing!! –Public Relations Departments –Companies fight unjust regulations Garnering Consumer Support Campaign Funding Political lobbying Political action committees

Economic Environment Factors that influence consumer buying power and marketing strategies Stages in the business cycle –Implications for marketers??Implications for marketers??

Economic Environment Key economic factors to consider and monitor: –Inflation –Deflation –Unemployment –Income More importantly, discretionary income –Resource Availability

Technological Environment The application of knowledge in science, inventions, and innovations to marketing. What’s the latest technology that has revolutionized the way we do business??What’s the latest technology that has revolutionized the way we do business??

Technological Environment The Toyota Prius: one of the First Hybrid Automobiles Available for U.S. Auto Buyers

Technological Environment Tech developments can give us a distinct competitive advantage or can put us out of business…

Social-Cultural Environment The relationship between marketing and society and its culture What is the big trend in the US in regard to eating habits?

Social-Cultural Environment

Important cultural issues can help marketers get consumers attention… –Terrorism as a platform to fight drug useTerrorism as a platform to fight drug use –Canadian pride as a platform to sell beerCanadian pride as a platform to sell beer Hockey (pre-lockout) Hockey (post-lockout)

Ethical Issues in Marketing Marketer’s standards of conduct and moral values

Ethical Issues in Marketing Promotional Strategy –Source of the majority of ethical issuesSource of the majority of ethical issues –Questionable advertising Distribution Strategy –Make product available to all income groups? Pricing Strategy –Most regulated –Price fixing… Product Strategy –Product qualityProduct quality –Product safety

Social Responsibility Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective Marketing’s ResponsibilitiesMarketing’s Responsibilities –Traditionally concerned managers’ relationships with customers, employees, and stockholders –Extended to relations with government and the general public –Today, corporate responsibility has expanded to cover the entire societal framework in the US and throughout the world

Social Responsibility